Trump undoes Obama legacy of for-profit college crackdowns

July 4, 2017

The Trump administration took aim late last week at an Obama-era rule designed to crack down on for-profit colleges.

The Department of Education announced Friday that Secretary of Education Betsy DeVos will “press pause” on the gainful employment regulations developed by the Obama administration. The rules require that career training programs, many of which are at for-profit colleges, graduate students whose loan payments don’t exceed 20% of their discretionary income or 8% of their total earnings. Rather than providing students with a degree in a broad field, these programs, which are typically less than four years, prepare students directly for work in a given occupation, such as health care support, cosmetology or mechanics. Programs that don’t meet those criteria for multiple years could lose access to federal financial aid.

Initially, career-training programs would be required to disclose the data associated with the requirement to students by July 1 of this year. On Friday, DeVos announced that she would give the schools until July 1, 2018 to comply with this requirement. In addition, the Department is extending the deadline for schools to file any appeals challenging the way the Department calculated their debt-to-earnings ratio.

“We need to get this right for our students, and we need to get this right for our institutions of higher education,” DeVos said in a statement announcing the delay. “Once fully implemented, the current rules would unfairly and arbitrarily limit students’ ability to pursue certain types of higher education and career training programs.”

The announcement marks the latest attempt by the Trump administration to challenge Obama-era regulations targeting for-profit colleges. Last month, officials announced they would revisit both the gainful employment rule and a regulation known as defense to repayment that allows borrowers who believe they’ve been defrauded by their schools to have their federal student loans wiped away.

“It is very clear this administration is looking for any possible tool it can find to weaken or delay the gainful employment regulation, while they are re-regulating it out of existence,” said Ben Miller, the senior director of postsecondary education at the Center for American Progress, a left-leaning think tank.

Borrower advocates have argued for years that many for-profit colleges use unseemly tactics to recruit vulnerable students and saddle them with debt in exchange for a degree that’s not worth much in the labor market. The collapse of Corinthian Colleges and ITT Technical Institutes — two major for-profit college chains — in the last two years, amid scrutiny from regulators, highlighted those concerns. Thousands of borrowers were left in the lurch after the two schools filed for bankruptcy.

Amid those concerns, the Obama administration moved to regulate for-profit colleges and faced intense opposition from the industry. The gainful employment rule was challenged several times in court over the past several years before finally becoming law.

Even after it was implemented, the gainful employment rule faced a court challenge from the American Association of Cosmetology Schools, which argued that its member schools were at a disadvantage in proving their students earned enough to meet the regulation’s standards because the Department’s methodology for calculating a debt-to-earnings ratio doesn’t properly account for cash tips, a hefty share of cosmetology graduates’ income. The judge in the case ordered the Department to give these schools more time to appeal their debt-to-earnings ratios.

In their announcement, Department officials cited the court order as a factor in their decision to extend the deadline for schools to appeal their debt-to-earnings ratio as calculated by the Department. In January, the Obama-era Department announced that about 800 programs were failing to meet the rule’s requirements.

Miller said he found it “concerning” that the Department was using a narrow court order that applies only to certain types of schools to delay implementation of the regulation as it applies to all programs. “This is not a good faith interpretation of what the judge said,” Miller said.

Advocates for for-profit colleges have argued that the Obama administration’s approach to regulating them unfairly targeted the sector, focusing more on the tax status of a school than its outcomes. They’ve said that they’re serving a population of students that wouldn’t have anywhere else to turn for higher education without these schools.

It appears DeVos’s Department of Education has embraced this point of view. In their announcement, Department officials described the gainful employment regulations as “overly burdensome.” In her statement, DeVos also said, “we need to expand, not limit, paths to higher education for students.”

The for-profit college industry praised DeVos’s approach. Steve Gunderson, president of Career Education Colleges and Universities, a trade group representing for-profit colleges, said in a statement that his association applauded the delay of the gainful employment regulation.

“The rule is clearly flawed,” the statement reads. “Recent studies and court rulings prove this rule needs to be revisited.”